FBO news: Crony capitalism with web-published prices

by philg

Airports provide a simple example of the crony capitalist system that increasingly prevails in the U.S. Private aircraft operators pay for airport infrastructure via federal taxes on fuel and airline passengers pay via taxes on tickets. The Feds then use this money to fund runways, taxiways, etc. at city- and county-owned airports.

What do the cities and counties do? They turn around and let a private fixed-based operator (FBO) run a monopoly or, sometimes, a duopoly, enterprise charging whatever prices they want for “handling,” parking, fuel, etc. Typically the only limit on what an FBO can charge is set by the existence of an alternative airport nearby. For example, the two FBOs at Chicago Midway can agree with each other to charge $8/gallon for 100LL, but they can’t go to $10/gallon because Gary, Indiana sells fuel for around $5/gallon (B. Coleman is awesome!) and driving from Gary to Chicago is practical.

The heavy jet operators may not care. The customer who charters a Gulfstream will also pay any fees that are assessed. Also, the jet operators band together to negotiate special pricing with FBOs and the biggest jet operators, such as the airlines, NetJets, and the U.S. government, negotiate nationwide deals with FBO networks.

Operators of piston-powered aircraft are in a precarious position because they don’t usually have a customer to whom a fee can be passed on and, even at $8/gallon, the FBO won’t make a significant profit due to costs of regulatory compliance, training, and hiring people for precision blue collar jobs in an economy where labor force participation is falling. The don’t have enough buying power to negotiate with the FBOs, who are busy trying to attract more Gulfstreams.

The organization that represents the interests of all general aviation operators, including the piston-powered mosquitoes, is AOPA. They’ve been trying to chip away at the issue of fees by asking FBOs at least to publish what the fees will be. They’re declaring a small victory this month as Signature, a big UK-owned chain, has started to disclose fees on its web site (it doesn’t seem to be complete, though, because (a) often these fees are waived if a minimum quantity of fuel is purchased, and (b) there are usually additional fees for overnight parking at the popular airports).

One AOPA project is trying to get airports to set up and publicize public transient parking areas. The visiting aircraft that doesn’t need any services can land, park, walk out a gate, get back in with a code, etc. So the aircraft operator uses the runways and taxiways that he or she paid for via fuel taxes and doesn’t get charged for using the FBO’s admittedly-expensive-to-run terminal. Maybe this will become a more critical issue for the public once the age of electric drone-like aircraft is upon us. If an electric drone is making a 1-minute stop to let off a passenger, why does it have to pay a $100 ramp fee?

27 thoughts on “FBO news: Crony capitalism with web-published prices”

  1. Let us presume that aviators heavily skew Republican. With our man in the White House actively supporting deregulation and competitive free enterprise, general aviation has a golden opportunity to cut and burn the onerous red tape that fouls flight plans worse than any inclement weather.

    I would think sky-writing would work better than Zuckbook or Goggle ads to get your point across.

    Make Aviation Great Again.

  2. Ideological bather. Airports are locational monopolies, more or less. How to constrain FBO’s to reasonable rates is neither easy nor obvious.

  5. If AOPA isn’t careful, they are going to ruin the very businesses that get new students into this industry. Perhaps signature should go after AOPA for raising their membership fees, getting into all types of business when they should be fighting for our rights!

  6. I the late the seventies I was on the receiving end of FBO abuse at SBN. F. Lee Bailey hear about my situation and volunteered to represent me and filed a lawsuit against the FAA and the County. During this process I learned many things about public airports and the assurances contained in the FAA’s Airport Development Air Program (ADAP). One of those assurances was that public airports must provide a aircraft parking ramp that available at all times to all transient aircraft.

  7. We here at Llano, Texas understand the cost involved in learning how to fly and we respect those who go thru this painful process. We here at Llano, TX try to keep flying affordable by keeping our fuel prices friendly to all pilots. No landing or tie-down fees are charged here and we are open to the public daily. The cost of learning to fly is expensive enough without adding more the bill. We have courtesy vehicles here and people are welcome to use them day or night, the only limit is the hours of when the restaurants are open.

  8. Request you add Vero Beach FBO to your list of abusive overchargers. I landed there last year to drop off two grand kids and was charged $70 for 15 minutes on their ramp. Cessna 340.

  9. Case Study: KLFT.

    There is a public parking ramp near Signature, the only FBO on the field. You can park on the public ramp and enter and exit the ramp through Signature without paying them a fee. The public ramp is free to park on. I verified this with the airport board, with Signature, and it worked beautifully on my recent visit to KLFT.

    Not many pilots know about this, so we need to publicize these cases when known, and ask for more public parking spaces at monopoly airports when they don’t exist. KLFT is a great example of how it SHOULD work, a public ramp you can use with no requirement to use services of the single high priced FBO.

    I am not opposed to FBOs in the slightest, I just want to pay them for their SERVICES, not for airport ACCESS. That’s the crux of the issue.

    Mike C.

  10. The issue regards way less political views than fiscal justice: An airport which receives financial support from the FAA is already ‘paid for” by ALL tax payers. Consequently, FAA supported airports should be subject to federal regulations that make it possible for ALL pilots al least to land and park for free. It is as simple as that. I personally would be even in favor of a community-run (township, county or state) fuel management (and pricing), but that seems to be judged too extreme by some. Not sure why.

  11. Cobb County, Ga allowed one FBO to buy the one across the runway and then shut them down…i.e. CLOSED, but lots and lots of empty ramp space…but no one can park on it.

    This leaves ONE FBO and NO PUBLIC parking. My second airplane is a KitFox.

    I inquired if there was a ramp fee, “Yes.”

    I said, “Only there long enough to pick up my GrandDaught.

    “Still ramp fee.”

    Ok, I won’t even shut down.

    “Still ramp fee. We wil get you tail number. If you do not pay ramp fee, We will file a lien against your airplane.

    Therefore, I went to an adjacent airport, no ramp fee, even offered to tie it down.

    RYY has received millions of dollars in Federal money to expand runway, improve lighting, taxi ways, etc.

    The airport manager (Cobb County employee making $100K++) doesn’t return telephone calls.

    As a county song sorta goes, “Me and my Gulfstream gonna go else where… .”

    So fellow pilots…where is equity in the County allowing ONE (1) FBO ???

    FD

  12. The Aircraft Owners and Pilots Association is taking the position that someone, other than the user of the service, can determine what prices and fees should be. And that government is the remedy. AOPA is wrong.

    Poor Signature. I wish AOPA would go into the FBO business and compete with these robber barons to lower our fuel prices. Since Signature has lost at John Wayne, does AOPA expect the next FBO to not charge the same prices and fees? Will the next FBO hire the unemployed Signature employees at the same pay and benefits that Signature was paying them?

    AOPA describes the prices in egregious hyperbole. Then, AOPA uses emotional terms like “fair” and “reasonable” to describe AOPA’s remedy. AOPA sets up a mechanism for easily registering the complaints to AOPA. AOPA is ginning up a problem that they are claiming only government can solve. Look out for even higher prices and less service at these airports in the future.

    The AOPA is trying to sue its way to lower fuel price and fees. Lawsuits are a big reason for high prices in the first place. As I said, maybe some crooked politicians were exposed in Los Angeles, but someone please call me when prices go down after this action.

  13. Let any FBO charge any prices they want. Just don’t force me to use them at a public tax supported airport when I’m not using their services. Kinda’ like the highway system. Paid for by tax and use dollars from everyone and accessible for free to everyone. But, charge anything you want on a toll road as long as I’m not forced to use it.

  14. Bill C: “Ideological bather. Airports are locational monopolies, more or less. How to constrain FBO’s to reasonable rates is neither easy nor obvious.”

    What’s wrong with AOPA’s idea of letting people use the airport that they paid for via a public parking area? Then the FBO (or FBOs) can set prices for services to whatever level they want and anyone who buys at those prices is engaging in a voluntary transaction.

    (A separate issue is landing fees charged by the airport. If the runways and taxiways are paid for already by the users, through fuel taxes and airline ticket taxes, why does the airport management get to collect a landing fee? If the issue is congestion at peak hours then maybe a fee is a way to reduce that, but it should go back to the Federal airport trust fund. Publicly funded airports should be able to get all of the revenue that they need by renting land for hangars.)

  15. Randy: I agree with you that running an FBO in our world of heavy regulations and tight labor market is a challenge.

    But on the other hand, without the competition of a public parking area, FBOs are free to charge monopoly prices (or collude, if there are multiple FBOs). The market only works for consumers if there is competition (see Econ 101).

    A friend runs a charter company and an FBO. He managed to negotiate a lease to become the 5th FBO, I think, at a busy airport where posted Jet A prices were about $1.50 higher than at some nearby airports (hard to explain this absent collusion!). The incumbent FBOs then spent about $1 million lobbying the city council members to overrule the airport management’s decision.

  16. Carl: “I personally would be even in favor of a community-run (township, county or state) fuel management (and pricing), but that seems to be judged too extreme by some. Not sure why.”

    Your idea is supported by Econ 101. If you can’t have a market then government-run is preferable to “unregulated monopoly”. I think this is proved here in New England.

    Go to the ramp at Nantucket (KACK) or Martha’s Vineyard (KMVY) in the summer. It looks like someone robbed a Gulfstream store. These airports are on islands and therefore there is no competition for a place to land and drive to the passengers’ destination. Both airports are entirely government-run. What do they charge for fuel? As of today, Jet A at Nantucket is posted at $5.25/gallon.

    Let’s compare to the “free market” at the sources for a lot of flights to KACK. KHPN (Westchester) has three FBOs. Rack rates range from $7.45/gallon to $8.52. KTEB (Teterboro, NJ) has four FBOs. Rack rates from $5.99 (yay, Meridian!) to $8.60/gallon. How about in the heart of Big Government is Best? https://www.airnav.com/airport/KIAD shows that Signature at Dulles offers Jet A at $9.29/gallon. Due to intense competition, however, you can buy it from Jet Aviation for … $9.25/gallon.

    Clearly there is something wrong with a “market” in which fuel costs way more at these Interstate-accessible airports than on an insanely expensive island where everything has to arrive by barge and ferry.

  17. Um, sounds like AOPA is in support of added government regulation that dictates free market pricing of a private sector business. Curious.

    How ’bout this, If you dont like the price, dont go there. If you say you dont have a choice, that is your problem. (your choice). Whine about fuel prices or ramp fees. Dont go there if you dont like it.

    Curious that the AOPA, dominated by rich white guys, (must be because they are airplane owners) is OK with added government regulation when it serves their self interest.

  18. FrankW: “Don’t get there” seems like an obvious answer when in a private marketplace. But in this case you’re saying “Don’t go to the airport that you’ve already paid $200 million for” and “Pay whatever a private company wants to charge to use a resource (runways and taxiways) that they had no role in funding or creating.”

    Imagine if the Federal Government decided to turn over admission to Yellowstone National Park, for which you’ve already paid, to a private company (ParkCo). ParkCo decides that it will charge $500 per person to enter the park (“ramp fee”) and $1,000 per person for an overnight in a basic hotel. Would you still say “just don’t go to Yellowstone if you don’t like ParkCo’s prices”? Remember that ParkCo didn’t build the park or buy the land or have anything to do with why people want to go to Yellowstone.

  19. FrankW and philg both echo my own thoughts. Why are privately-run ATC and FBO monopolies a Bad Thing, but letting private insurance companies run our health care a Good Thing? Do all the smart government employees head over to aviation, while the others congregate around health care?

    And it’s OK to bankrupt a poor person who gets cancer and can’t work, but it’s wrong for a private monopoly to take money from someone who owns a $40M jet… or even a $100K little Cessna?

  20. Brian: In theory there is competition among private health insurance companies, so I don’t think there is a direct analogy between Anthem and a monopoly FBO. Anthem has to compete with Humana, United, etc. https://www.nasdaq.com/symbol/antm/financials?query=ratios shows Anthem earning 3-4% profit. That’s not an obvious monopoly situation.

    If you got rid of all of Anthem’s profit, costs to their customers would be only 3-4% lower. They would still pay more for health care than people in any other country on Planet Earth.

    Also, I don’t think it is the case that Anthem is able to charge more than twice as much for a policy as a low-cost supplier of exactly the same product (compare the Dulles price to the $4.25/gallon price in New Bedford, MA: http://www.airnav.com/airport/KEWB ).

  21. So let’s try to set the funding record straight here. FAA, Airports, are part of US Dept of Transportation which gets proceeds from fuel taxes, on Cars, Busses, Trucks and yes, Airplanes. Each time you fill up your car (truck) you have paid for the fuel, plus state and federal taxes used for highway improvement.
    Now let’s imagine that say the state of California has now decided that only Trucks and suv’s can drive on highways in their state and small vehicles like KIA’s and volkswagons are shunned and with local pricing forced out. How would this go over in the US national highway system?
    There is no difference in the way airports are funded through the same fuel taxes which allow for funding of improvements. What is occurring now at airports across the country should force a rebellion. Any aircraft of any size are by law allowed to use any publicly funded airport, just as we all expect to use the federal and state highway system, funded by fuel taxes.
    For those who think private aircraft are only used or owned by rich white males, you need to do some fact checking. A quickly growing pilot shortage should be a wake up call to anyone traveling by air in the not too distant future.
    Air Transport Pilots do their early learning as private pilots before they progress to commercial and beyond. If you purchase fuel (Aircraft low lead or vehicle grade 89-91) you have a right to use the highway or the taxiway without charge.
    JMC

  22. @ROBERT BOOTH
    Could you provide the citation for the lawsuit at SBN. Google doesn’t locate it.
    Thanks

  23. When you vote in November, please remember which party tried to privatize the ATC system and hand it over to the big airlines. Which national leader outright lied when he called our airspace / air traffic control system “ancient, broken, antiquated, horrible”. Think before you vote this time. Please.

  24. Lest you forget that general aviation includes people like myself who are lucky enough to fly a small Citation. Don’t assume it is ok for Signature at KMOB to charge me up the kazoo just because I use jet A instead of avgas.

  25. Philg: “Clearly there is something wrong with a “market” in which fuel costs way more at these Interstate-accessible airports than on an insanely expensive island where everything has to arrive by barge and ferry.”

    Evidently fuel prices at Martha’s Vineyard and Nantucket are decided upon more on the idea of attracting aviation tourism for the benefit of the islands’ business than on budget perspectives of specific private enterprises (the FBO).

    A “market” in the hands of private business, instead, is inevitably manipulated: do you really think that FBOs spread over a certain interstate-accessible geographical area have never “met” to agree on a “base” price ABOVE which they will practice free-market ‘competition’ ?

    A common-good perspective VS. a private-pocket perspective. The choice is ours.

    So, maybe I should take back what I said in my previous post: it IS a political issue. FBOs have absolutely NO title to charge ramp fees. Their arrogance is evidently due to unethical political protection. We should keep this in mind when we cast our vote in our city, state and Country.

  26. Carl: I think that fuel prices at MVY and ACK are set so as to provide break-even funding for the parts of the airport that the Feds don’t fund. This is alluded to in https://www.nantucketairport.com/Airport%20Commission%20Meetings/2014/9.9.14-Packet.pdf

    They are not selling fuel at a loss to attract more Gulfstreams (with which they are amply supplied!).

    James: I hope that you don’t think that I was ignoring the turbine crowd. I think AOPA’s “park and walk away for free since you’ve already paid the taxes” proposal also would cover jets and put a practical limit on what an FBO can charge.

    RMM: “please remember which party tried to privatize the ATC system and hand it over to the big airlines”

    I agree that this plan to trash one of the few parts of government that works reasonably well is mostly Republican, but some Democrats support it as well and not all Republicans are behind it (which is why we have Kavanaugh, but not a monopoly ATC crony!).

    RMM: “Which national leader outright lied when he called our airspace / air traffic control system ‘ancient, broken, antiquated, horrible'”

    Trump was not wrong on this, though I disagree with him that turning ATC over to a monopoly crony would be the right fix. Simply because it has worked reasonably well in Canada is not evidence that it would work in the U.S. (Canadian government infrastructure projects, e.g., for light rail, may cost only a small fraction of what their U.S. equivalents cost).

    The system is ancient, broken, and antiquated! There would be huge fuel savings if the computer systems were smart enough to create 3D point-to-point routes rather than trying to turn it into a 1D problem with planes on airways. U.S. ATC uses an automated version of paper processes (from the 1940s?). ADS-B implementation has been a debacle. The FAA’s various attempts to modernize have been breathtakingly expensive and often failures. The whole thing is held together by controllers’ individual excellence, but that cannot be depended on going forward as the overall quality of the U.S. workforce decreases and race-based hiring preferences are used (see https://www.wsj.com/articles/the-airport-control-tower-is-no-place-for-racial-redress-1528240025 : In 2013 the Obama FAA changed the process for hiring controllers and then applied the new policy retroactively. No longer would the FAA give hiring preference to applicants with degrees from CTI schools or military experience, as it had in the past. In order to foster “diversity” in control towers, the agency would move away from merit-based hiring and toward more subjective measures. To attract a higher percentage of candidates from racial and ethnic minorities, a “biographical questionnaire,” or BQ, was added to the screening process. Applicants were asked about their upbringing, family hardship and the like. Those who didn’t score well enough on the BQ were deemed ineligible, regardless of how well they had performed on tests measuring cognitive skills.)

    Worldwide, we are wasting $3-5 billion per year and on track to waste $15 billion per year (as well as pump a lot of extra CO2 into the atmosphere) due to using primitive tech. See https://www.forbes.com/sites/oliverwyman/2018/07/20/new-technology-may-help-airlines-cut-pricey-fuel-consumption-and-meet-environmental-regulations/#41aa7672f076

  27. @Philg
    Thanks for a well considered and thoughtful AND informative response. This sort of reply is helpful and educative. Much appreciated.
    RMM

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